How To Select A Mortgage Lender

How To Compare Mortgage Rates

At face value, comparing mortgage rates is easy.

You can apply for pre-approval with 3 or more lenders and simply compare the rates youre offered. But remember your interest rate isnt the only thing that matters. You also need to look at factors like closing costs, origination fees, annual percentage rate , and discount points.

Luckily, its easy to compare mortgage quotes and find the best deal.

All mortgage offers come in the same format, called a Loan Estimate, so you can quickly skim for rates, fees, and other important information to find the best offer.

How to read your Loan Estimates

You will find your loan terms, quoted interest rate, and monthly payment on the first page of your Loan Estimate.

Along with comparing interest rates, you can use this page to:

• Make sure all your loan offers are for the same loan type
• Make sure theyre all quoting the same type of rate
• Compare monthly mortgage payments to see which loan is cheaper month to month

On the second page, you will see your closing costs and other upfront expenses, like prepaid taxes and homeowners insurance.

Note that loan costs are separated into two categories: Origination Charges, and Services You Cannot Shop For.

Origination charges represent the lenders own fees. Youll want to pay close attention to this section when shopping for a mortgage because these fees can vary a lot from one lender to the next. Shopping for a lower fee could save you serious cash at the closing table.

Images: CFPB

You Can Decide Whether To Allow A Lender To Check Your Credit

A loan officer may ask for permission to check your credit. Knowing your credit score allows the loan officer to give you accurate pricing information about different loan options. An experienced loan officer can also help you check your credit report for errors. However, a lenders credit check can show up in a future credit report and can result in a slight dip in your credit score. Within a 45-day window, you can have multiple lenders check your credit without any additional impact on your score. Learn more about what to consider when deciding when to allow a lender to check your credit.

Understand What Differentiates Mortgage Lenders

• After narrowing the field, contact loan officers at select institutions to get a sense of the personal attention youll receive. The local loan officers at Premier Bank take time to listen to your specific needs and goals while forming a meaningful relationship with you.
• Go beyond the interest rates and get a detailed breakdown of mortgage closing costs. Fees paid for home appraisals, title searches, legal services and interest rate reductions can total thousands of dollars. Premier Bank Bank and other lending institutions provide loan estimate documents allowing consumers to compare these costs.
• Timeliness is another factor. Most lenders will lock in the interest rate thats in effect at the beginning of the application process. Find out how long the rate lock-in period lasts. If you have a deadline for moving, youll also want to know how quickly the mortgage lender will make a decision on your application and then set a closing date. Ask the lender how long it usually takes to get to closing.

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Understand Apr Versus Interest Rate

Two mortgage terms that are easy to confuse when comparing mortgage terms is APR, or annual percentage rate, and the interest rate. You might assume comparing the interest rates across different loans is a fair comparison, but its not. A mortgage with a low interest rate can have additional fees rolled in that make it more expensive in the end than a mortgage with a higher interest rate. The APR controls for all that. Compare the APRs from one to another, and youll be making an accurate comparison.

Now, its up to you! If you want to learn more about your mortgage lenders pre-approval offer, dont hesitate to ask. Here are smart questions to ask a mortgage lender before you commit.

Understand Loan Costs And Fees

When comparing loans, your monthly payment amount can depend on the interest rate and point mix.

Points are fees you can pay upfront to decrease your interest payments over the course of the loan. Generally, homebuyers who plan to stay in their home for a long time may want to consider buying points upfront because they will have lower overall payments over the course of the loan.

For example, if you took out a 30-year mortgage for $100,000 at 5% interest with no points, your mortgage payment would be $537 each month. Paying for points might allow you to lower that 5% interest rate.

Hypothetically, lets say you paid $2,000 for two points and decreased your interest rate from 5% to 4.5% . With a 4.5% interest rate, your monthly mortgage payments would decrease to $507. It would take you 67 months to make up the $2,000 difference, so you would have to stay in your home for nearly six years to make it worth your while.

Check whether buying points makes sense for your situation. USAA has a calculator that can help you make an informed decision, but you may also want to talk to your mortgage lender or broker to help you determine your exact point and interest rate mix.

Taking time to understand all your financing options can help you choose the right mortgage. Youll be able to better negotiate with lenders and know what to look for in a mortgage that fits your needs.

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Know What Other Consumers Are Paying

As a final pre-shopping item, you can use national average mortgage rates along with your credit score to get a rough idea of the APR you can realistically expect to obtain for a mortgage.

One tool that is very useful is the Loan Savings Calculator provided by myFICO.com. This breaks down the national average APRs, as well as state averages, for various types of mortgages into credit tiers.

For example, let’s say I have a FICO score of 730 . If I plan to get a 30-year mortgage in Florida, I can see that the average APR obtained by other borrowers in my credit tier is 3.808% as of Oct. 4, 2017.

Open And Closed Mortgages

There are a few differences between open and closed mortgages. The main difference is the flexibility you have in making extra payments or paying off your mortgage completely.

Open mortgages

The interest rate is usually higher than on a closed mortgage with a comparable term length. It allows more flexibility if you plan on putting extra money toward your mortgage.

An open mortgage may be a good choice for you if you:

• plan to pay off your mortgage soon
• plan to sell your home in the near future
• think you may have extra money to put toward your mortgage from time to time

Closed mortgages

The interest rate is usually lower than on an open mortgage with a comparable term length.

Closed term mortgages usually limit the amount of extra money you can put toward your mortgage each year. Your lender calls this a prepayment privilege and it is included in your mortgage contract. Not all closed mortgages allow prepayment privileges. They vary from lender to lender.

A closed mortgage may be a good choice for you if:

• you plan to keep your home for the rest of your loans term
• the prepayment privileges provide enough flexibility for the prepayments you expect to make

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Check Your Credit Before Applying For Your New Loan

Before you start the refinance process, you should check your credit reports and scores to get an idea of what lenders will see when evaluating your application. If you don’t like what you see, you still have time to address the negative factors on your credit report before submitting your refinance application.

Remember, the process of refinancing is very much like applying for a conventional mortgage, and the better your , the more likely it is you’ll be able to get the best terms on your new loan. If you have good credit, use this to your advantage and try to negotiate with the lender for the best APR and terms possible.

If you check your credit and see any inaccurate information, make sure to begin the dispute process with any of the credit bureaus where the mistake appears. You can get a free copy of your credit reports and scores from Experian to see what shape your credit is in. Experian can help you better keep tabs on your credit and will quickly alert you to potential fraud or identity theft.

How To: Select A Mortgage Lender

One of the most important decisions you will need to make during the home buying process is selecting a mortgage lender. Here are some of the factors you should take into consideration when making this decision.

COMPARE RATES

Different lenders offer different rates and going with the first lender you find without doing research may cost you more in the long run.

SPECIALITY LOANS

If you qualify for a specialty loan, such as FHA, picking a lender who had expertise in that type of loan. Its good to know upfront if a lender doesnt offer the product you want or need.

COMPARE QUALIFICATIONS

Lenders set their own guidelines for people to qualify for loans, such as income and credit score. If most of your finances are in a good place, this shouldnt affect with whom you can apply. However, if youre looking for a loan with less than stellar credit, this may impact which lenders for which you qualify.

GET ADVICE

Reach out to friends and family to ask who they’ve worked with and if they would work with them again. It may also help to read reviews from other people who have worked with the lender. Once you narrow down the list, schedule a time to meet with them so you can ask questions and get a feel of what it will be like to work with them. Everyone’s experience is different and gaining as much insight as you can from different perspectives may make your decision easier.

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See If You Qualify For A Specialized Loan

Some loans offer more favorable terms than standard mortgages. If you qualify for any of them, they are worth considering. These include Federal Housing Administration loans, VA loans, and loans from the Department of Agriculture, otherwise known as a USDA loan.

For instance, VA loans are an option for veterans and make it possible for you to buy a home at generous rates and without needing a down payment. Low or no money down are one of the significant benefits of a VA mortgage.

FHA loans offer low-interest rates and are available with a lower credit score than most other lenders will accept.

If you think that you might qualify for any of these specialized loans, do some research and take advantage of them. They may make it possible for you to purchase a home more easily than you could otherwise.

Check Out The Lenders Reviews

Lender reviews can be an incredibly useful tool to help you choose a someone to work with because they can give you great insight into what its like to work with a particular lender. Zillow has the largest online lender directory with hundreds of thousands of lender reviews. You can search for your lender on our lender directory to read reviews.

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How To Choose A Mortgage Lender: 6 Tips For Success

Shopping for the perfect home can be an exciting time. You might spend countless hours seeking out the home of your dreams, but in the process, you might be left to wonder how to find the right mortgage lender as well.

Lets discuss the value of working with a good mortgage lender and how to go about choosing the right one for your needs.

Talk To Your Network Of Advisors Friends Relatives Or Others Whom You Trust About How They Chose Their Mortgage Lender

Ask your advisors: What were the criteria that were important to them? Are these criteria also important to you?

• Ask for recommendations. Your advisors might recommend a specific lender or loan officer, especially if the advisor lives near you. Or they might recommend a method for finding a lender.
• Dont just ask for names and numbers. Ask your advisors why they liked a particular lender or loan officer. What was important or comfortable for them may not be important or comfortable for you.
• A housing counselor can also be a good resource to help you figure out how to identify lenders.

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Ask About Fees And Timelines

Your home may be the biggest purchase of your life, so don’t be afraid to ask questions. For example, does the lender charge fees to complete your loan? Ask how much these will add to your closing costs, or consider a lender that doesn’t charge fees.Another important detail is timing. If you’re buying in a hot market, you may want a lender who can complete your loan in less than 30 days. A lender should also be easy to get a hold of so that you and your agent can resolve problems and get the deal done on time.Here’s a list of questions to ask when choosing a mortgage lender:

• How much are your lender fees?
• What programs do you offer for first-time homebuyers?
• How soon can you close?
• Is your entire team local?
• How many days a week do you work?

If you’re house-hunting in a competitive market, a local team that works 7 days a week is often your best bet. Delays can happen when members of the mortgage team are on opposite coasts or they’re closed for the weekend. For more insight on this, talk to your real estate agent.

How To Get A Mortgage Loan

Getting mortgage pre-approval before deciding on a property can be crucial to avoid looking at homes you cant afford. It will save you time and make the mortgage process more manageable.

Check our home affordability calculator to see if youll be able to afford a monthly mortgage payment.

To apply for a mortgage, you’ll need:

• Copies of your last two pay stubs
• A copy of your most recent tax return
• W-2 and/or 1099
• A state-issued photo ID, such as your passport or drivers license
• Statements of all your assets
• Bankruptcy discharge documents
• A recent
• Statements of any outstanding debts some lenders may require information about monthly credit card payments
• In some cases, lenders may require additional documentation, like a history of alimony payments and gift letters, so make sure to ask before applying.

Before applying for a mortgage, make sure to check your . Additionally, feel free to compare mortgage lenders. Even though lenders will pull your credit and it is considered a hard credit inquiry your score will not be affected if all the inquiries are done within 30 days. recognize this as shopping around for the best mortgage rate.

Lastly, check your debt-to-income ratio before applying, as well. Lenders prefer borrowers with a debt-to-income ratio lower than 36%, and many lenders will not even consider borrowers with a ratio higher than 43%.

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Request A Loan Estimate Written Quote Or Lender Fees Worksheet From The Lenders You Contact

When you contact lenders request a Loan Estimate, quote or Lender Fees Worksheet that outlines the key items in their mortgage proposal. You should use the mortgage rate and closing cost information presented in these documents to compare mortgage proposals and select a lender.

Lenders should ask you questions regarding your personal and financial profile as well as the details of your home purchase so that they can provide the most accurate proposal possible. When you contact lenders ask that they not pull your credit report as this can negatively impact your credit score. For most borrowers, they should be able to use your summary credit information to provide you a Loan Estimate, mortgage quote or Lender Fees Worksheet.

We summarize each of these items below. Please note that lenders should provide these documents free of charge.

Use our free personalized mortgage quote feature to compare no obligation quotes from top lenders. Our quote form is easy-to-use and requires minimal personal information. Comparing multiple mortgage quotes is the best way to find the lender and loan that meet your needs.

• Lender Fees Worksheet. Borrower should also request a Lender Fees Worksheet that provides a detailed breakdown of all the costs and expenses associated with a mortgage including fees charged by lenders and other third parties. The lender is not required to provide you with the worksheet by law, but will likely provide it to you if you ask.

Getting Prescreened Mortgage Offers In The Mail

Why am I getting mailers and emails from other mortgage companies?

Your application for a mortgage may trigger competing offers . Heres how to stop getting prescreened offers.

But you may want to use them to compare loan terms and shop around.

Can I trust the offers I get in the mail?

Review offers carefully to make sure you know who youre dealing with even if these mailers might look like theyre from your mortgage company or a government agency. Not all mailers are prescreened offers. Some dishonest businesses use pictures of the Statue of Liberty or other government symbols or names to make you think their offer is from a government agency or program. If youre concerned about a mailer youve gotten, contact the government agency mentioned in the letter. Check USA.gov to find the legitimate contact information for federal government agencies and state government agencies.

Does a lender have to give me anything after I apply for a loan with them?

Under federal law, lenders and mortgage brokers must give you:

• this home loan toolkit booklet from the CFPB within three days of applying for a mortgage loan. The idea is to help protect you from unfair practices by lenders, brokers, and other service providers during the home-buying and loan process.
• a Loan Estimate three business days after the lender gets your loan application. This form has important information about the loan:
• the estimated interest rate

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